Bank of America Subsidiary Issues Auto-Callable Yield Notes Linked to Energy, Utilities, and Semiconductor ETFs

Structure and Pricing of the Contingent Income Notes

The preliminary pricing supplement filed on July 21, 2026, outlines the complete terms of the Contingent Income Auto-Callable Yield Notes. The notes are issued by BofA Finance LLC with a full and unconditional guarantee from Bank of America Corporation. The public offering price is set at $1,000.00 per note, with an underwriting discount of $8.00 per $1,000.00 principal amount, resulting in proceeds to BofA Finance of $992.00 per note before expenses. The disclosure indicates that the initial estimated value of the notes as of the pricing date is expected to fall between $910.00 and $960.00 per $1,000.00 in principal amount, which is notably less than the public offering price, reflecting the value of embedded options and other structural costs inherent in the product.

The notes will be issued in minimum denominations of $1,000.00 and whole multiples thereof, with a CUSIP number of 09712GG32. The disclosure states that an affiliate of BofA Finance may pay a referral fee of up to $3.00 per $1,000.00 in principal amount to other registered broker-dealers in connection with distribution. Additionally, certain dealers purchasing the notes for sale to fee-based advisory accounts may forgo some or all of their selling concessions, potentially offering prices as low as $992.00 per $1,000.00 to those investors. The notes will not be listed on any securities exchange, making them illiquid instruments without a secondary market mechanism for trading.

Underlying Assets and Sector Exposure

The notes are linked to three sector-focused exchange-traded funds managed by State Street and VanEck. The three underlyings are the State Street Energy Select Sector SPDR ETF (Bloomberg symbol: XLE), the State Street Utilities Select Sector SPDR ETF (Bloomberg symbol: XLU), and the VanEck Semiconductor ETF (Bloomberg symbol: SMH). The starting value for each underlying is established as its closing market price on the pricing date of July 28, 2026, serving as the benchmark from which performance is measured throughout the note's term. The disclosure specifies that the observation value for each underlying equals its closing market price on applicable observation dates or call observation dates, multiplied by its price multiplier of 1, subject to adjustment for certain events related to that underlying as described in anti-dilution provisions.

The structure creates what the disclosure describes as a "least performing underlying" calculation, whereby the redemption payoff at maturity depends on the performance of whichever of the three underlyings has declined the most relative to its starting value. This approach concentrates risk on the worst-performing sector among energy, utilities, and semiconductors. The filing notes that the price multiplier for each underlying is 1, subject to adjustment for events such as stock splits, dividends, and other corporate actions affecting the ETFs, ensuring that the note terms remain economically equivalent following such modifications.

Contingent Coupon Payments and Monthly Income Features

The notes offer investors a contingent coupon rate of 18.50% per annum, payable monthly in the amount of $15.417 per $1,000.00 in principal amount, translating to 1.5417% per month. However, this coupon is contingent on a specific performance condition: the contingent coupon payment is made only if the observation value of each of the three underlyings is greater than or equal to 70.00% of its starting value on the applicable observation date. This means that if even one underlying falls below this 70% coupon barrier, no monthly coupon payment is made that month, eliminating the attractive income feature entirely for that period.

The monthly coupon structure creates a critical monitoring point for investors, requiring regular assessment of all three underlying ETF values. The filing states that contingent coupon payments are made on applicable contingent payment dates, with dates specified beginning on page PS-4 of the pricing supplement. The final contingent coupon payment at maturity follows the same 70% threshold rule, meaning that even at the note's conclusion, investors receive this final coupon only if the least-performing underlying remains above 70% of its starting value. This design concentrates income risk and reward entirely on the continued health of the weakest-performing sector among the three linked assets.

Automatic Call Feature and Early Redemption

The notes incorporate an automatic call feature beginning with the January 28, 2027 call observation date. The filing discloses that if the observation value of each underlying is greater than or equal to 100.00% of its starting value on any call observation date, all of the notes will be automatically called with no further investor discretion. When automatically called, investors receive the early redemption amount, which consists of the principal amount of $1,000.00 per note plus the applicable contingent coupon payment, with all amounts due on the applicable call payment date. This feature effectively caps potential gains for investors even if the underlying ETFs significantly outperform, limiting upside participation to the coupon payments received prior to the call.

The monthly call structure, beginning in January 2027 and continuing through the note's approximate three-year term, creates regular opportunities for early redemption. Once called, no further payments are made on the notes, and investors' capital is returned. This mechanism transforms the notes from a fixed-maturity instrument into a potentially shorter-duration investment if the underlying assets appreciate. The disclosure specifies that call observation dates and corresponding call payment dates are outlined beginning on page PS-6 of the pricing supplement, with each call payment date also serving as a contingent payment date for those still holding the notes at that time.

Downside Risk and Capital Loss Scenarios

The most significant risk factor disclosed in the pricing supplement relates to the notes' exposure to substantial capital loss. The filing states that if any underlying declines by more than 50% from its starting value at maturity, the investor's investment is subject to 1:1 downside exposure to decreases in the value of the least performing underlying, with up to 100% of principal at risk. This means that if the worst-performing ETF falls to, for example, 40% of its starting value, investors would receive only 40% of their principal, representing a 60% loss of capital. The redemption structure creates asymmetric risk, as investors participate fully in losses but have gains capped by the automatic call feature.

The filing distinguishes between two redemption scenarios at maturity. If the ending value of the least performing underlying is greater than or equal to 50% of its starting value, investors receive the full principal amount of $1,000.00 per note. However, if the ending value falls below this 50% threshold, the redemption amount (excluding any final contingent coupon) will be less than 50% of principal, creating potential losses exceeding 50% of the initial investment. The disclosure warns that investors could lose up to 100% of their investment in the notes, particularly in extreme downside scenarios. This feature means the notes function similarly to a leveraged short position in the worst-performing sector, with all downside risk borne by note holders.

Terms, Maturity, and Timeline

The notes carry an approximate three-year term, with key dates specified throughout the disclosure. The pricing date is July 28, 2026, followed by the issue date of July 31, 2026. The maturity date is August 2, 2029, with a valuation date of July 30, 2029, subject to postponement for certain events affecting observation dates. This timeline provides a fixed endpoint for the investment, though the automatic call feature may reduce the actual holding period significantly if underlying ETFs appreciate. The filing emphasizes that the valuation date is subject to postponement, indicating that market disruptions or other events could extend the term.

Monthly observation dates and contingent payment dates are scheduled throughout the term, beginning with the first observation date and continuing monthly through maturity. The filing indicates that specific dates are listed in the accompanying product supplement beginning on page PS-4. Similarly, call observation dates and corresponding call payment dates are scheduled monthly beginning January 28, 2027, also detailed in the product supplement. This regular monthly cadence creates consistent monitoring requirements and potential cash flow events for investors, transforming the notes into a monthly income-and-risk assessment exercise rather than a passive buy-and-hold investment.

Credit Risk and Guarantee Structure

All payments on the notes are subject to the credit risk of both BofA Finance LLC as the issuer and Bank of America Corporation as the guarantor. The filing emphasizes that the notes are "fully and unconditionally guaranteed" by Bank of America Corporation, meaning that BAC stands behind all obligations of BofA Finance regardless of the performance of the underlying ETFs or other factors. The disclosure explicitly states that the notes are not FDIC insured and are not bank guaranteed, clarifying that investors do not benefit from federal deposit insurance protections. This distinction is crucial for investors comparing these notes to bank deposits or other products potentially covered by FDIC protection.

The guarantee represents the credit quality floor for the investment, with investors bearing both the structural risks inherent in the contingent coupon and automatic call mechanisms as well as the credit risk of the Bank of America organization. The filing provides no guidance on the probability or nature of default scenarios, leaving investors to conduct their own credit analysis. The reliance on Bank of America's guarantee means that deterioration in BAC's credit quality would directly impact the notes' value in secondary trading, though no secondary market exists for these securities according to the disclosure.

Tax Treatment and Regulatory Disclosures

The pricing supplement is filed pursuant to Rule 424(b)(2) under the Securities Act of 1933 and relates to registration statement numbers 333-290665 and 333-290665-01. The document references an effective registration statement dated December 8, 2025, along with a series A prospectus supplement and product supplement EQUITY-1, all dated December 8, 2025. These documents together provide the complete offering materials for the notes. The filing carries a standard disclaimer that the SEC, state securities commissions, and other regulatory bodies have neither approved nor disapproved the notes, with the warning that any representation to the contrary would constitute a criminal offense.

The product supplement and prospectus materials contain additional provisions regarding risk factors, anti-dilution adjustments, and events of default. The filing directs readers to "Risk Factors" beginning on page PS-11 of the pricing supplement for detailed discussion of investment risks. Similarly, the accompanying product supplement contains risk disclosure on page PS-3, the prospectus supplement on page S-7, and the base prospectus on page 7. These documents collectively address taxation implications, potential adjustments to the note terms, and the conditions under which BofA Finance could accelerate or default on the notes. The filing notes that events of default and acceleration provisions are defined in the senior indenture relating to the notes, referenced in the broader prospectus materials.

Distribution and Selling Arrangements

BofA Securities, Inc., an affiliate of BofA Finance LLC, serves as both the calculation agent and the selling agent for the notes. The disclosure indicates that BofA Securities will be responsible for calculating observation values, determining whether coupon conditions are met, assessing whether automatic call conditions are triggered, and computing the final redemption amount. This concentration of calculation authority in a single affiliate of the issuer creates potential conflicts of interest, though the prospectus materials presumably address this through standard calculation agent indemnification and dispute resolution provisions referenced in the base documents.

The distribution structure permits certain dealers to forgo selling concessions in fee-based advisory accounts, potentially offering investors prices as low as $992.00 per $1,000.00 in principal amount, representing potential savings of up to $8.00 per note. However, the majority of investors will pay the full public offering price of $1,000.00. Referral fees of up to $3.00 per $1,000.00 may be paid to other registered broker-dealers by BofA Finance affiliates, creating incentive structures that may influence distribution channels. The filing does not disclose expected offering size or demand levels, leaving investors unable to gauge whether these are limited or broadly distributed notes.